Hivemind: State of The Market, Saylor’s End Game & AI Growth in China

Transcript

Nothing said on the hive mind is a recommendation to buy or sell securities or tokens. This podcast is strictly forformational purposes only and any views expressed by anyone on the show are solely our own opinions, not financial advice. [music] Hello everyone. Welcome back to another episode of the Hive Mind podcast. Uh we were off last week partly because the founders were in China doing a little AI trip. Uh and so we're gonna talk about markets. We're going to talk about that trip uh a decent amount today. Um as always on the podcast we have Yan

Ventures partner. We have Jason, head of markets at Deli. Uh and we have Jose, head of labs, head out of Deli Labs. Obviously myself, Cedus, head of research at Deli. And today we're also bringing on Rosson who is uh does AI investing at Deli Ventures. And hopefully you've read a bunch of his stuff on Twitter. I always post really insightful bangers. Uh so today is Wednesday, March 25th, 10:45 a.m. Bitcoin is up to like 71.4K now. Uh there's been like a bit of relief over the past few days. Um you know there's these rumors of ceasefire and

everything. [snorts] How are how are people feeling about the markets here? Maybe Jason you want to start. >> Um it's a tough question. I don't know. These markets are really tough especially when you get like uh headlines every like day or day and a half, right? Which just kind of whipsaw things. It's definitely not a market you want to be. Um, I mean, if you are high leverage per trading this market, it's it's definitely got to be tough. Um, it's also kind of hard to have like a like a real good understanding of like what the like impacts of what's already happened are going to be over the next, you know,

like three to six months. Like not being like I'm clearly not like, you know, a geopolitical oil expert or energy expert, right? even though energy is like a core input to everything uh throughout the economy. So like trying to gauge what the actual implications over the you know next 3 to 6 months are at least you know with disruption production all of that stuff even if there is a ceasefire like there still are going to be ramifications for [snorts] that. So, like I'm I'm still trying to figure out and and underwrite like what that is. And like to me it just seems like I still feel like equities like are pretty priced to perfection right now.

Like I still feel like equities haven't really priced in um a lot of what's going on and what's already happened. I feel like you've already seen it kind of, you know, in a couple other areas start to manifest. So like I don't know. I'm still super cautious right now. Like I I don't know. I don't I don't really trust either side at this point. I'm kind of just looking at the market to kind of give me like an idea of like what it's thinking and like I don't know. Oil still elevated, right? It's not really moving too much after these, you know, ceasefire headlines. It was, you know, down obviously initially on Trump's tweet yesterday. So like I don't know. I don't have a great read on it. I still think there's

probably higher likelihood to to downside in the short to near term than than upside. Like I don't know if I if I had like a bunch of things [snorts] that were you know down and you know down a couple percent and we rallied I'd probably sell and and just kind of look at it as like a a nice gift to get out closer to break even and then kind of like reassess the uh the situation because it's definitely not clear what's how this is going to play out in my opinion. Um, yeah, it's it's a tough one. It's it's a really tough market environment.

Um, I'm curious what what uh what everybody else thinks and also, you know, with with PD or sorry, Rosson um being in China, like what the what the view is from people over there, right? Because like I don't know, I only really get the view of Twitter and and New York, right? So, like I'm kind of curious like what the views are from elsewhere um on on what's going on. It's it's definitely interesting. >> Yeah, I mean I I would say my news diet is still fairly like US- ccentric and like large majority of them non-domemestic Chinese sources, but you do see some like viral videos and some viral posts. There was one that went viral of like I think it was like

retweeted by one of the affiliates of Chinese state media which was a cartoon of like Persian cats like basically kind of making fun of Trump for being like fairly erratic and like you know causing problems where like it it wasn't necessary. Um but like they would find ways around like their traditional paths to to energy. And I think this is one of the reasons that the Chinese are investing so heavily in a lot of their domestic inputs and supply chains, right? Like realizing in a globalized world that it's increasingly going to be difficult to depend on traditional trading partners and they don't want those vulnerabilities. So hey, you just we need our own semiconductors. We need

to invest really heavily in renewables. We need to, you know, invest really heavily in nuclear. Um but yeah, they are quite dependent on imports of oil, imports of food. Um and so yeah, those are real dependencies that I'm sure people in the Chinese government are quite worried about, you know, knocking 10% of global oil offline that they were getting at a discount. So, um I don't know exactly what the the views on the ground are. I'm sure they're they're pretty diverse, but um I I would assume folks are generally unhappy with one of their sizable, you know, uh energy import partners uh obviously in in a chaotic situation.

>> Yeah. Uh, I think crypto specifically, it's pretty promising to see Bitcoin not nuking while Sailor isn't bidding with STRC proceeds. You know, perhaps the reason why is because people are, you know, pricing in him turning that faucet back on. Um and and it seems like that game can go on for quite some time if you look at the the the dividend liability and the uh offsetting amount of kind of Bitcoin you can buy w with each uh amount of issuance. So yeah, the

idea there is she's bas basically selling these uh preferreds at in the market and and guaranteeing 11% and as long as the market kind of keeps believing in his ability to repay that in the long run um which he kind of definitely has the ability to do so because he can sell other assets namely um strategy shares if to kind of supplement it. So that game can go on for quite some time and I think that is going to be kind of the next or the continued catalyst on the BCC side. Um and and yeah, I think that'll return next week with with the dividend payment going out, but um it's it's a bit different than what you see with kind of

your normal stocks going X and and um because you have this this uh just ATM component. And then on the alt side, you kind of have these these spurts of strength. Um, but then you you get this periodic wash out. I think it's pretty evident there's not that much money slloshing around because you have BTC strength and then kind of a handful of alts doing well. It's kind of just been the hot narrative at the time, right? you have TA with the all-in guys shilling it and then uh I think you see some other alts catching a bit namely AI ones um in in kind of Venice and Grass and then um you're still seeing a lot of strength in in

Hyperlid as you get more alternative assets trading there and it becomes less uh cryptocentric but outside of that it's it's been pretty uh pretty meager um market and so I think yeah the equities component is is tricky. uh you definitely have somewhat of a slowdown in US consumer and I agree there's there's definitely quite a bit priced in but I you know as before we've seen the market held up regardless of kind of consumer strength you know you can you can maybe expect that to continue but at a certain point uh I think it realistically can if you kind

of have continued weakness question is just going to be will there be some kind of stemi activity going into midterms terms or will will will something be done on that front to to create an environment that's that's more favorable for um when people are heading to the voting booths. But it's I agree it's it's tricky. I I feel like Bitcoin's in a in a decent spot with how much it's been flushed out and kind of the not relative strength, but it's the fact that it's holding off while the the bid is offline. Um I think it'll be yeah telling to see basically how much it continues. I I think if you if you don't have any massive escalations in in the

conflict even when you know just now when Iran came out and said you know these demands are very far away uh equities actually held up well too right and and what you what you do want to look for is is uh strength in the face of bad news. So I think there's some signal in that. Um, yeah. >> What do you think the actual endgame is for >> Sorry, go ahead, Cedus. What was the question? >> Well, I mean, I don't know if you want to take it in another direction, but >> I just felt like uh I don't know. I I feel like this is a kind of a obvious place to to be hedged and not take too much risk. Um, again, maybe maybe I'm uh I'm I'm and I'm happy to be wrong here,

but it does feel I mean now less it's it's sort of more consensus. Um, but it's markets still haven't dipped that much and it feels a bit like COVID when it was like a thousand cases and Twitter like our Twitter bubble was insanely loud about it, right? It seemed obvious within the Twitter bubble if you were following Biology or or even Celus back then and and a bunch of people who were who were talking about it, but outside no one really knew about it, right? Um and it's like thing something which has like very potentially dire like asymmetric uh consequences and doesn't really seem priced in or at least like even if there was a ceasefire announced I don't know markets are down like like you know two or 3% like I think S&P is down you know less than 5% for sure. It

just feels like uh a place where I would rather just just buy once once this stuff is like fully cleared out because I I don't know. I'm I'm I'm not an clearly not an expert on this and I think like no one's really an expert on geopolitics. Like who anyone I've ever listened to over the years has been like deeply wrong and deeply certain that that they were right at the same time which is kind of a deadly combo for the geopolitical experts. Sort of Peter Zhan being the the poster boy. But like there is a lot of like second order and third order consequences from having the straight closed for this long from these like oil facilities getting bombed the natural gas facilities getting bombed like we don't have much information but it seems like some of this might be

offline for years that the Russia plant got bombed like uh yesterday or the day before too we've never seen this kind of like level of supply destruction and at the same time the closing of of the of the straight of horm which affects like fertilizers it affects uh oil which affects everything else seeps into CPI um and makes like rate cuts way less likely obviously I think affects risk on the margin so I don't know to me it seems like uh like a pretty clear spot where being defensive makes sense and just like buying higher in in a few months once if this stuff clears if if that's the case >> I'm kind of in line with that >> I mean yeah I I've slowly kind of moved

in that direction over the last two to three weeks, right? Like I started off coming back from PR actually like the the day before I was looking at Poly Market. It's like oh odds that we strike Iran by the end of March was like 9% or something. Next day we're at war with Iran. I'm like all right well like nothing ever happens, right? So and then like slowly I've started to make this progression towards what Jose's kind of described. Um, like yeah, I mean I I have like, you know, long-term holdings that I'm just, you know, just core portfolios that are, you know, multi-year things that I'm not touching.

But like in terms of everything else that's, you know, short, medium-term, tactical, whatever it is, um, yeah, it's just very defensive for me. Like I just I don't have a great read, which means like I can't I can't justify being super risk on. And and the intuitive thing for me is kind of, you know, what Jose lined out. It's like I'm not an expert on this stuff, but if the core input to everything literally like everything in in economic growth from food to to pretty much every literally everything is disrupted this badly and we don't really have a clear clear view on um what it looks like to get this stuff back online, what those timelines are.

Um it could get worse, more things could get bombed, right? So, I'm just like looking at it and it's like, yeah, I can't justify being super risk on um at all. Uh so, yeah. And to that note, it's like, okay, well, like what would I want to hedge my stuff with? Like, I wouldn't actually want to hedge with BTC for all of the reasons Yan lined out. Like, I'm not trying to hedge Bitcoin and then have Sailor come in and dump 10 billion in market buys over the next month or something, right? Like, I'm just not not thinking that's ideal. So like yeah, I think you you just have to look at equities and equities are clearly the the main risk asset that hasn't priced in at least what's already happened in my opinion. Um let alone what what you know what the actual

timeline for the stuff coming back online could be. Um I do think you know oil is probably going to be like I I it's like oil is not something I would trade. I have no no edge in oil, but like the things that oil impact seems a lot like right like I don't know if oil is going to level off here or if it's going to level off at 90 or 100 or 70 like I don't know. But what I do know is it's going to be higher than it you know was before most likely. So like what does you know kind of thinking like okay like if if oil is going to be like generally higher over the next year or two like what things should be higher because of that. So, you don't really have to make a huge directional bet on where oil ends up, just that it's going

to be higher. Um, that's like the way I'm trying to think about it and reason out some tactical positions at least. Um, but yeah, it's it's super tough like I keep saying. Um, it's a super tough uh market environment for sure. What? [clears throat] >> Yeah, I No, I I was just going to say I think in the 1970s like the oil embargo took like six or seven% offline and the straight of Hormuz is like easily 10%. And obviously what happened in the 1970s was uh pretty catastrophic in terms of inflation, energy prices. I think it was offline for like 6 months or something.

Um, so yeah, I think the US also has like a lot less space from a fiscal perspective to deal with it this time around. So yeah, >> I think I think one one difference there is that I was reading something I don't know if it was today or yesterday about how much less oil actually is responsible for GDP versus the 70s. And so I think like that's obviously it's going to be bad, but I think a pure 1970s situation like we're not as dependent on oil as we were then.

>> Yeah. What's also US production capacity now versus then? I think it's quite a bit higher. We're now we're like 2x the second largest. Uh >> yeah, we're we're like >> Yeah, we're like 20 million barrels. So So yeah, like the US situation has changed a lot, right? Um, but globally, you know, I would say there's still a lot of people that need oil for their economies to function. Um, so yeah, if you just take like it's notoriously inelastic in terms of like the the demand and supply. So I feel I feel if you just actually have an extended period of time where you take 10% of oil offline, then that would be quite quite destructive to demand across a whole host of uh other areas.

Yeah. Um, can we talk about Sailor quick? Like what do you guys think the endgame is here? Because the way I see it and Jeff Dorman had >> Jeff Dorman had a good tweet on this >> and basically it's like at the end somebody needs to lose, right? Like master shareholders think they're safe. STRC uh owners think they're safe. The other ones in the stack think think they're safe. like this STRC thing that he has. Basically, it's like a soft peg to $100, right? And then he changes the dividend yield to kind of get that back to $100, but he doesn't actually have an obligation to like continue to like

actually peg that to $100 or continue even paying out the dividends. Now, I think the dividends are also like very tax beneficial where I think they're like return of capital is the way they're distributed. Um, so they're actually like taxfree or there there's something where like if you look on that that dashboard that FUD posted the other day, I know a few of us threw it around, they the actual like the the tax equivalent yield of STRC is actually like 30% or something right now. So, yeah, because there's like >> how can it be 3x?

>> Well, because I think they're saying like I think that yield is all taxfree and so then they're just backing into what would the pre-tax yield have to be to get the same after tax yield. >> But like wouldn't it be 30% tax rate? It would be like 14%. >> Not 30. >> No, no, no. You're right on that. >> 14. >> Um, I got to look into that deeper. Yeah, >> but like I I don't know what the endg game is here because the only way this works forever is if Bitcoin Kager is 30% a year basically, right? And like that's what Sailor believes in everything. Um [snorts] but I don't know, part of me feels like maybe there comes a point where he decides that like he has enough Bitcoin

and then he just kind of like rugs one part of the capital stack. I don't know. >> I mean, something has to I agree. Something has to lose. Uh, I mean his target's 1 million. I forget what he's at now. Um, >> so like 750K or even more than that. >> Yeah. So I mean in that in that sense he's not terribly far away. And I guess you know this is always a concern. Um, and there's a handful of ways this whole thing plays out. You can argue that in in the current scenario, it probably increases the EV of [clears throat] or the probability of success in in the sense that, you know, you don't necessarily want to be constantly buying

new highs because eventually that that comes back to really bite you and and that's been his MMO for some time. So, I think, you know, the the probability of failure is actually higher if you keep buying new highs because ultimately when you get the pullback, you're in in a much worse spot. And and you know, it's kind of what we saw with him now where uh his average price is kind of roughly where we are now. Um I think dunking on that is kind of dumb because the the real comparison is is strategy price over that time period, but that's a different story. So I think you know if if you're still bullish on this asset then the probability of success actually improves if he's able to kind of deploy at this lull and and then you know the

the bid kind of comes back more broadly versus the bid disappearing as he's just uh breaking out and like basically creating new tops each time. Um but yeah, I agree. I think one of these things have to rug. um you probably see the dividend go away first and then if there are liquidity issues uh strategy probably takes the biggest hit. Um because there's like selling BTC is obviously really tricky unless he you know telegraphs and and says we will sell this finite amount and then nothing else because after selling this we're good on our debt coverage and then it's just okay how do

we try and monetize this uh balance sheet of Bitcoin and try and get yield off of it and and and grow things that way. Um, >> so like I think there's a world where like it I think yes something has to lose but there's a lot of things that lose before he has to sell Bitcoin basically. >> Yeah. I mean if you look at this dashboard great dashboard u Bitcoin quant he's basically just become super horny for this stretch. STRC recently it's like the only thing he's really issuing outside of some at the money offerings. um like if you look at the volume you know over the past few months he basically is like predominantly STRC now and then yeah that effective yield is like 25% which makes more sense. So

basically they're taking the 55.2% max tax rate and then with the dividend of like 11 something%. Um, so I mean you can see why it's juicy to investors, but it also just feels like if you're holding this, you you you think in your head that you're going to be able to eventually like get out in time because I think that like obviously if he stops to honor like any part of the capital stack, um, the MNAF premium will go down. He won't be able to issue anything new. But like if he hits a point of Bitcoin that he likes, then like does he really care that Master trades at a discount like an MNV discount, like if he's like majority shareholder and he kind of owns all the

Bitcoin in there anyways through Master, it's like maybe that is partly in his head the endgame of like once he gets enough Bitcoin or like the, you know, the the the perpetual motion machine kind of like runs out, he's okay with like everything else kind of like failing and just master trading at discount. But yeah, I don't know. That's like the scenario where I think that's the one I want because that's the one where Bitcoin doesn't get like really impacted. You stop getting the inflows, but he's not like selling Bitcoin because because it doesn't seem like he would ever sell Bitcoin to cover the dividend payments, right? They kind of like is antithetical to the whole point of this whole game.

Um so as that yeah interesting as that dividend expense just gets bigger and bigger it just kind of yeah something to keep obviously this is like one of the major the main market movers and it has been over the last few years so something to keep like watching for now I think at least in the short term it'll probably only be accretive considering the size of them but we'll see he if they actually if he actually is able to issue like 20 billion more of this then it becomes like a serious you know >> I'd be surprised if he's able >> I'd be surprised if he's able to for sure for sure but like even like five billion more still is a lot like if he's

paying 11% right now >> cash yeah like that interest expense can get up to like a billion dollars a year at some point right it's a lot um so yeah that's markets I don't really have anything different to say from what you guys have said. Overall, I think uh yeah, crypto has looked good relative and like crypto does have a history of bottoming first and like that doesn't mean that uh this is the bottom or anything, but um seems like a lot of people who've, you know, wanted to risk off their crypto did most of that. Um, we'll see. Obviously, if something really bad happens, like that

changes things, but >> yeah, I'd have a lot less conviction in BTC right now if it wasn't for STRC. >> Yeah. Yeah. Um, let's go to China because we're already 25 minutes in, I think. >> Yeah. How was China, guys? >> Talk. So, yeah. How was uh I think >> Russ, you want you want to start? So, by the way, uh yeah, because you you you kind of were a lot of the instigator for this been been sort of shilling China to us for for a while and we've been talking to a bunch of managers there getting excited about the ecosystem. So, maybe you want to like kick it kick us off.

>> Yeah. So I I guess um I I don't know if it was shilling China, but it was just living here, being on the ground and like seeing kind of the density of AI talent, deep tech talent, robotics talent, and kind of the dissonance between that and um market sentiment towards China after I got here in like early 2024. It was kind of, you know, the the classic China's uninvestable. Um you know, it's not a market economy. like they're cracking down on all of their internet companies and like obviously that did happen. Um and then there was a massive real estate bust and so you know it seems like the Chinese economy did go through four or five years where there was a massive deleveraging a lot of foreign capital

fled and especially institutional capital. Um but then you know in 2024 I was here on the ground you started talking with people um and obviously the AI revolution was happening in the US. Um, and I think sentiment was like there's just a a little bit of a disconnect between sentiment being super low and then kind of actual talent on the ground being, you know, some of the best in the world, right? Um, and so obviously over the course of 2025 that started to shift a little bit with the Deepseek moment and then obviously Chinese humanoids and then the rise of China open source. Um, and so yeah, it was kind of just like, hey, instead of just reading talking

points as they come through in the news, which tend to bifurcate between China is uninvestable and like Tik Tok videos that China is like taking over the world. there's actually a lot of nuance and there's things that are structurally very difficult about China, but there's also a lot of positives in terms of like human capital, infrastructure, supply chains and and so like actually coming to visit, meet with entrepreneurs on the ground, meet with investors is the best way to actually collect those nuanced data points for yourself. Um, and so yeah, I was uh excited to to kind of host the group as they came to to kind of meet a good number of folks that that I've been chatting with here for the for the last like probably six months when

we started getting a little bit more serious. Um, but yeah, as as Jose mentioned in his note, I do feel like over the last three months in particular, valuation has started to accelerate quite dramatically. you've seen the Hong Kong markets obviously starting to get very excited particularly around like AI and robotics names um you know a lot of early stage funds that we've been looking at are seeing their portfolio companies marked up by some of the sizable growth funds in China um so yeah I I do think the ecosystem in terms of valuation is evolving quite quickly if you look at indices across the board it's still materially below the US and I think there's reasons for that right there's

there are like less deep capital markets. There's regulatory overhang, geopolitical overhang, but at the end of the day, I also think there's basically two markets that have a full vertical AI stack. Um, and one of them's the US, which obviously has a very very robust and deep capital market, and a lot of those names have been bit up pretty tremendously. And then now increasingly there's China, which is number two. Um, so yeah, obviously it's not a it's a complicated market and there's um reasons why you should be cautious, but it's also one I feel like that's worth looking at and basically evaluating for

yourself before just like using secondhand um hearsay to basically come to come to your own conclusion. >> Yeah. By the way, I got an email actually from Dan Jun that the Hong Kong Stock Exchange became the biggest in the world in 2025. I didn't realize this, but uh it was 119 new listings and more than 30 billion in IPO proceeds, which apparently is both is more than both New York Stock Exchange and NASDAQ, which is kind of crazy. And you could definitely see that on the ground. There was something very crypto going on. Like I mean Zippu and Miniax are the two big model companies there and they both went public uh and they're trading at like 40 and 50B basically on on like less than

100 million of revenue for for both of them which is kind of wild because it's it's it's like like five to 10x the multiple that OpenAI or Anthropic ever raised at you know and I would definitely pay more per dollar of revenue for Anthropic or OpenAI than I would for these Chinese model companies. So, it's very frothy. And then you're kind of seeing the the private markets raise using these public marks as as comps, but obviously the public marks are like pre-onlocks. So, it's a very crypto um which I uh I think my my crypto experience helped me dodge actually because I I was getting pretty excited at one point about some of these private opportunities. But yeah, it's it's tough when the public mark is like pre-unlocks

and you never know when you can go public either. Um, and I also think they're just like the only two ways to bet on Chinese AI right now. Like pure plays is like Zippu and Miniax. And I think when more things go public, it sort of gets diluted. Um, but what I would say, so yeah, software I was kind of underwhelmed by. I was also underwhelmed by just like I wrote an update on on Twitter and I think Ross is going to put one out too and I'm curious to hear what Yan thought of everything, but I I was underwhelmed by software. I was a bit underwhelmed by the the founder quality overall. Um, but I I was really uh impressed with hardware. Like I think it's really hard for anyone to compete on hardware with China given just some of the stuff we saw in in Shenzhen, right? And the some

of the stuff we heard uh just the iteration cycles with when you have 70% of your inputs coming from the the greater Bay Area and like pretty much everything comes from China. And we saw some we saw a lot of like robotics companies, a lot of consumer hardware. I think it's very hard like if you're building that not building it in China is probably going to be pretty tough which is kind of like pretty obvious conclusion not not particularly contrarian but uh yeah curious if you had any any takeaways actually. >> Yeah. No, the um it was interesting to see the consensus on uh from the perspective of of builders and and and investors there

around the ideal kind of archetype of what they're trying to invest in which is a combination of uh Chinese hardware manufacturing knowhow and talent and and just engineering talent and then trying to service um western markets and and so and in order to do that you kind of need someone western on the on the front end basically and then uh Chinese on the back end where like even all the hardware that's kind of bu being built in the US is still sourced originally from China and so kind of exactly what you're saying where you need someone there to to shorten the the iteration cycle and then like they there's broad consensus there that you know the the

Chinese uh consumer market is pretty weak speak for, you know, a couple of reasons. One, just the what I was pretty uh surprised to hear was just the degree of kind of youth unemployment and and particularly that there's probably it's it's probably 2x the number >> guy said, right? >> He said 25, but like I was looking around everything says that's that's probably overstated, but so like let's just call it 20. And then the idea being that it's actually probably understated by half because so many people are just going to grad school after university because they can't really find positions. And so, you know, you have that from a consumer uh perspective and then you also have um just the the low propensity to spend on products from

Chinese consumers. I think it's it's kind of, you know, somewhat of a cultural thing where they've just been able to produce things that usually a fraction of the cost and and kind of specialize in in copying and knockoffs and, you know, that that kind of permeates through the the consumer spending patterns and and so their goal really is to just target Western markets. And so, um, the it was funny. I think, you know, we went in there obviously very open-minded about, uh, trying to partner and and and and invest there. And, um, but I think if you kind of question Americans on US China relations, they would think of it a bit more adversarial, whereas, you know, everyone we spoke to was really

welcoming. There was, you know, all everything was focused on how do we kind of work together? there wasn't this this us versus them component. You know, maybe it's just the the appropriate strategy because that is what serves them best, but it it still felt very genuine and and you know, everyone was really welcoming, but I think they just they realized that the the American and Western more broadly consumer is kind of where you want to be selling. And so it's it's positioning you trying to find, you know, a way to kind of leverage the knowhow of selling to western markets with the knowhow of of producing in eastern ones.

>> Yeah. You also just had a lot of founders that were like so impressive on paper like they'd been at the top university in China, which is literally like the top university in the world, right? And and also I think I think it's actually the most selective place in the world. I think it's more so than the IITs even just obviously just given the sheer number of people that that want to go there. Um and then they were stint at DJI or Bite Dance managing like a 100 people like products with with hundreds of millions of users. Um but like when they were pitching it just lacked a certain like vision and and and like some of the I mean in in the US it's kind of like you have the opposite problem, right? you have like a bunch of people that pitch really well, but

actually there's no substance, but they just sell you like these big dreams. Um, and in in in China, you definitely had like the reverse of that where um it was it was just like yeah, they're just not in general, they were not good. Obviously, there's a language barrier, but I'd say like not good pitchers um not supervisionary with the stuff that was being built. It was always like something it was generally stuff that already existed, right? There was not like a lot of like when when we went to SF together last time, there was like the dude drilling into the earth to terraform, you know, and like and people trying to build new models and stuff like this. Um and and in China, it's much more like we're doing uh lovable, but you know, we're going to execute

faster or, you know, we're doing like lawnmower robots, but they're like way cheaper and better. You know, it was it was a lot of like one tox versus zero to one, which is maybe just like cultural, right? Like if you have to be like if you have to compete on this on this really hardcore grades and and and and stuff your whole life, you just don't have the time to to and it it's not rewarded, right? Having these Yeah. Um Yeah. So, I don't know how Yeah. I mean, I guess to do that, you have to be rewarded like on on valuation because the ceilings are just much smaller, I think. And I just didn't feel like you were like most of the seeds were being done like 30 mil or more and then there

was a bunch of pre-launch consumer stuff at like 100 or 200 million. It wasn't very compelling I think on the startup side right now. Um, >> right. We didn't see too much. It was Yeah. And then as soon as we left we or like towards the tail end of the trip some some more negative uh regulatory headlines hit in terms of um basically China being less reliant on western capital in into their markets and and and basically kind of gatekeeping and making it difficult for Americans in particular to um be able to invest in these markets at various stages. And so I think it's reasonable to expect that rhetoric to

accelerate, not accelerate, but to continue in this direction from both sides, you know, US and and China. But I think what that translates to is probably a lower ceiling on some of these Chinese markets just because they are uh going to be you know gated of western and American capital in particular where I think right now people are are looking for good opportunities and you're seeing a lot of kind of you know activity in late stage secondary markets for preipo companies but I think you know China seems like or is is very clearly the other big global player and So I think that there was going to be a shift in in terms of investing and capital shifting there but that's I'm sure it'll still happen but

to a much smaller degree. Um and and that has knockon effects right it's just if if this money is not coming in then then some other pocket won't follow and and so uh I think what that basically does is just kind of reduce the ceiling on on the opportunities and the multiples that some of these can trade at um for the time being. >> Yeah. which you got you can see that in public markets like the it trades at like 60% on a PE multiple and you know the size generally it's like much smaller than the US markets but I I would say you didn't it's tough because in SF you do have like for the talent that comes out of let's say open AAI and and anthropic and stuff they do sometimes raise like $4 billion seeds right so you don't have that in China

right like even the the really expensive seeds aren't $4 billion but they are like a hundred million or 200 million right Um, so it's definitely cheaper at the top level, but I'd say the median valuation is probably like fairly similar. Um, which isn't the case in public markets. But yeah, I mean, one thing that stood out just to also say some some positive stuff because it was a super impressive trip was how hard they work. Like we had meetings at all hours of the day, all weekends. Like the people made no distinction between weekends and weekdays. Um, one founder came to meet us on the day his wife gave birth, which was pretty Chad. Uh, depending how you want to look at it, I guess, but it was, yeah,

>> debatably Chad. >> Debatably Chad. Um, I mean, it was he was like, I'm not a doctor. Like, what am I going to do? [laughter] So, >> sure's wife loved that comment. >> Yeah. Um, and and insanely qualified, insanely hardworking, really nice people, too. Like extremely welcoming. Um yeah and I think there are some interesting like I do think there's some alpha in finding these founders that are that are sort of more divergent there and finding managers who are looking for that because I think there's a lot of pattern matching going on people looking for people that have been to bite dance and stuff like that. Um, yeah. And on the software side, it's just hard to invest in software right now. Like I

don't know. I I Yeah, the the you're almost one big lab release away from like being irrelevant, right? Um like these things are moving so fast. It's just really tough. Like I don't I don't know. I I used to I was really excited about applications and vertical AI. Kind of talked about it here. >> Now I'm not even sure. Uh I mean I still think there's going to be opportunities there, but I don't even know if we're going to have UIs, right? if agents get good enough, you don't need a UI. Like you can just ask for what you want and and and receive it like generatively and on the go. So yeah, I don't know. Um I I I think I mean I I think that I think those are fair critiques and I do think that I expect over the next 24 months

like the US model providers to continue to pull ahead just based on the compute like the sheer breadth of compute that they're going to bring to bear. But at the same time, I do think like the US economy and other western economies are like very exposed to rapid AI disruption and like the entire economic model is generally services-based and obviously China has a big component of that too, but less so considering it's it's more of a a manufacturing economy. Um, so I think that presents like a pretty big question mark. And then the other thing is like you know I feel the US is trying to have its cake and eat it too where hey we're going to re-industrialize but

we still want to have like the reserve currency of the world and the deepest capital markets of the world and those things are often intention right like do you want to depreciate your currency and invest really heavily in being like competitive on exports and reinvest on infrastructure while simultaneously like having a strong dollar while simultaneously ly having the rest of the world invest in treasuries which is propping up the stock market, right? Like at at some point you kind of have to choose which path you want to go down and in my mind like in the event that the US does pull back from its role as global hedgemon like other markets and other equity markets are likely to need to be relatively inflated compared with

the US which has been basically the capital markets for the globe for an extended period of time. And so I'm not saying that won't happen, but I am saying in the event that the US does choose to pull back from its its role, you know, starting in 1945, then I do think there will be ramifications for how people choose to allocate capital. Um, and yeah, like will you continue to have 65 plus% of the relative market weight, you know, um, basically saving in US indices 15 years from now? I I don't know, right?

>> I mean, I'm really bullish Chinese public markets still uh honestly like at this at this at these levels. And I think Hong Kong is going to keep doing well. Although, like I don't know that thing well enough. There's some people telling us about some shenanigans that go on there that reminded me of crypto and I don't know how how true that is or not with these IPOs. But I do think the public markets are going to do well. Um, it's also like it's hard to understand what the Chinese government wants. Um, like and you kind of need to know that before investing in China, right? In a way that you don't with the US. Like the US like Trump can do and say as much like dumb [ __ ] as he wants, but the courts event like there's rule of law,

right? So there's some there's, you know, probably won't get a third term. Like the tariffs get ruled and constitutional, whatever. That just doesn't happen in China. Um, and so like today you find out they arrested or the the Manis founders are detained. Um, you know, and and then they did this thing where they don't want like offshore vehicles to um uh offshore vehicle. Yan is is insulting me in chat. [laughter] Um, so it's hard to say what they want.

like it seems like it would make sense for the for them to have like keep the private markets pretty um like let let like uh Chinese nationals benefit from those and sort of definitely not let their talent leave and go start companies elsewhere um and and not ARB like the China talent because there's a lot of people trying to do that right where they we'll have our hardware in China and we'll have engineering here but we'll set up a company in Singapore or Hong Kong or even the US and I think that's clearly like something they don't want right Um, but the public markets, it seems like it would benefit them to have like really liquid, rich public markets, uh, where you can like dump on foreigners, right? I don't know. Um, [clears throat] but but it's not clear

to me that they want that. >> Well, it seems like they kind of do because they they're they're trying to block that last late stage or basically that regulation with with red chips, right? It's it's they're it's they're okay with you buying in in equity in public markets, right? where where the Chinese investors can get liquidity and effectively dump on foreigners, which it's a protectionist policy. I get it. Um but I I like Yeah. No, that is what they're trying to do though based on like that regulation. >> Weren't they trying to encourage people to go public on in Shanghai rather than Hong Kong?

No, you just like it's basically the this particular structure that you used that they were less excited about you listing in in in Hong Kong. So like as opposed to having the moonshot structure, they preferred like the JUI structure which just gives them like more more domestic control and it's not like this entity like shadow entity that's like actually in Cayman. I think it's just like uh the Chinese government's way to ensure that they actually have more control over a lot of like the larger strategic AI companies.

Um but yeah, I mean I would say like clearly relative to the US like the upside for capital is capped, right? Like you'll never have companies that challenge the state in China. But simultaneously I also feel like there is a period where like having a relatively you know not a a crazy stock market but a um inflating stock market to basically fill the gap that is a massive deflationary rug from the real estate market you know over the last three years. They do need a pieces of the economy to start inflating and rotating store of wealth from real estate which got to be very unhealthy in terms of

like cost of living which had you know obviously impact on demographics to you know uh in inflating the equity market to get out of this deflationary spiral is something that you know seems to be fairly palatable from a strategic perspective. So yeah, I guess I I do see the Chinese government, you know, tentatively starting to be excited about a long-term structural bull market that doesn't get too crazy just because it is an avenue out of kind of the current deflationary environment, which which is obviously a pretty good tailwind for equities. So are there pockets where things seem super frothy like Miniax and Jupu? Like yes. But at the same time,

holistically, I actually would expect, you know, the next 5 years to see pretty like, you know, not not crazy, but like structural appreciation in R&B and like a relatively healthy, slowly growing equity market just to help them get out of this deflationary event that they've been in for the last four years. >> Yeah. And and then China itself, I mean, we [clears throat] we the first city we spent about a week in was Shenzhen. Uh, so basically it's a metropolis of about 20 million people, but it was a fishing village 45 years ago. So everything is brand new, clean. It's it's really really uh a sight to behold, especially uh relative to kind of the uh decrepit

state of a lot of western blue cities and and basically what's happening here. Like it you just feel safe there. It it everything is orderly. You kind of see drones doing deliveries. It it definitely feels uh futuristic and and it's kind of I think the headline you heard uh going into it. Um and then Shanghai was was really beautiful too. Uh it was pretty funny. You kind of see elements like this kind of looks like Paris. This kind of looks like London. This kind of looks like New York. And then so but um yeah really just beautiful modern city. Um >> what was what was like the coolest Let's do something more fun. Not that this this has been great, but like I saw some things like from Anneil, but uh what was

like the coolest thing you guys saw on like maybe like the robotic side or I don't know like the your favorite? >> Yeah, I had to leave early so I missed the Dark Factory tour so I'm pretty pretty salty about missing that. Um so I think the coolest thing for me was the humanoids but I imagine for those guys that that was probably it. Yeah, the the Xiaomi Dark Factory was pretty absurd. Just like I don't know what what size was it? Do you remember, Rosson? >> I think it was 500,000 uh square feet.

>> Yeah, I'm a word cell. I'm not a numbers guy. >> Yeah, it was like just of of just robots uh robot arms like automated um like like transport vehicles. >> Yeah, I think they're producing a car every 90 seconds or something insane like that. Yeah, it's it's pretty crazy. It wasn't uh I don't think we saw the the the dark one. There was some humans there um doing like helping the machines or fixing the machines or stuff like that, but the scale of it was like mind-blowing. Um yeah, like totally insane. And also just Xiaomi like went from idea to shipping their first car in like 18 months to mass production in like 3 years. It's just like only

something that could only happen in China. It's just like absurd, right? Apple spent 10 years and like 10 10 billion dollars or something and and couldn't get a single car shipped. >> So yeah, I do think like I I do think you guys had some some quite quite solid critiques that I agreed with, but the one thing that I do think is like shouldn't be underestimated is kind of like the Andy Grove like uh line of reasoning. not the only the paranoid survive, but like if you if you lose proximity to like the forces of production and the production line, then you also like start to lose the ability to innovate on those things, right? And I think that's like a really

good example where Xiaomi is just like, you know, close to production of a ton of different like types of electronics and so they can spin up a beautiful car within like 1.5 years. Whereas Apple ended up outsourcing like all of those things, you know, over the course of decades and now are much further from, you know, a lot of the processes that would need to like basically build a beautiful car. Um, and so yeah, like I think Dan Wong talks about this a lot, but just there there is a a high cost of innovation to not being close to the actual production and just doing design and financialization like eventually does come back to bite your ability to innovate. Um, especially in deep tech or

manufacturing and a lot of these other domains. So, so yeah, it's like maybe you have less like single founder visionaries, but you do have an ecosystem that you know is continuously and rapidly evolving, which I think if you look at things like DJI and their tech stack or what's going to come in robotics and what we've seen in EVs, um I I would expect that stuff isn't going to slow down. >> Yeah, I think one funny point was basically Everyone we spoke to was, you know, very smart, humble, measured and and, you know, not hyperbolic at all.

But they were just the one thing everyone was also highly convicted in was just that the global market share will be 70% China, 30% US, 0% Europe. Like everyone is just convinced Europe is cooked. [laughter] And it's just pretty funny. >> It was the number one It was the number one bonding experience between the Americans and the Chinese. You'd have this like stately elderly Chinese man and he'd be like, "Oh yes, like obviously in humanoids, you know, China will have 70% share and the Americans will have 30% share and the Europeans will have nothing." And you know, me and Yan look at each other like, "Yes, of course. Of course, yes." Give Jose a quick sideways glance. Um, but yeah, like I I honestly do think it will be

very difficult for for places like Europe in terms of competition. I think US is definitely a little bit more um has its own growth engines, but I feel China's I mean Europe is a little bit more like directly in the line of fire because China's kind of going after a lot of its industries and just doing it better. Um >> well I mean they're doing it better than than some US than a lot of US companies too. we just have protectionist policies and a strong consumer and so you have a large enough market that that can kind of insulate itself in certain areas but um so that like they don't export some of these products like the the Chinese electric vehicles that we would just take Uber were were all really nice. Um,

>> yeah. Don't you didn't you guys didn't you guys feel while you were there that like the quality of life relative to the cost was like abnormally kind of high and like the at least to me like in China it just feels like the the exchange rate does feel too low and you go back. >> I think there's some trade-offs though like I I I I would jaywalk and I would look at you and I would watch you patiently waiting for your green light. [laughter] I live here, man. You know, I I gotta I gotta I gotta >> And you're driving and you're getting like photographed everyund or whatever.

There's like >> every car that drives by you're just getting photographed. >> Really? Like you can see the flashes. >> Mhm. >> So So yeah, I'm not saying the passport. >> Yeah. Yeah. Yeah. I'm not saying there's not I'm not saying there's not trade-offs. I basically was saying like relative to the material quality, it just seems like the R&B is undervalued like it like it they should let it kind of float and and actually it would allow the rest of the globe to be more competitive on exports and it would actually solve a lot of the trade imbalances. Like this is basically what the US wants, right? Hey, can you actually have the R&B appreciate

slightly so we have less of a trade imbalance? Like we don't want to have, you know, if you look at Scott Besson's latest speeches, we don't want to have decoupling. We just want to have adjustment because this is unsustainable. And a lot of people would say China has an unsustainable trading relationship with the rest of the globe because they just export so much. And a lot of it has to do with the fact that the exchange rate is relatively low. And so I actually think a lot of those issues if you just saw the R&B appreciate by like 20% overnight would would be assuaged pretty materially that has other >> people have been saying that for years though. I feel like I've been hearing this for for years that that they should do this that they're going to do this like why haven't they done it yet?

>> Uh yeah I'm not sure I want to say this on a podcast. Um [laughter] >> yeah I mean I I think I think it's basically like there are strategic industries that China wants to be very competitive in. Also having a ton of exports like basically allows them as the state to direct resources as they see fit and strategically and compound in areas that are you know uh nationally strategic to them. Whereas if you appreciate the R&B, it's effectively kind of giving more of the wages to um kind of consumers and workers and they would obviously um then be able to direct that capital individually as

opposed to, you know, having more centralized control over how it's spent basically. >> Agreed. Guys, I got to jump to to another call. I'm already 10 minutes late, but yeah. >> Yeah, this is I mean, we're up on an hour now. >> Um, >> see you, Jose. >> See you. >> But, uh, probably wrap it anyways. Thought that was a good talk. I don't know if anybody else anything else they want to bring up. >> No, that was great. I I loved listening to uh to the China takeaways. It was great. Thank you guys.

>> Next time I'll have and explore myself. >> Was the food? >> Yeah. Come. >> How was the food, Yan? >> Yeah. I [clears throat] don't >> uh I am a bit of a garbage disposal when it comes to food. Like I'll eat everything and anything. So uh I didn't I I liked it. I mean I think what ended up happening is there's basically and and Rosson can definitely uh provide better detail on this. There's Chinese [clears throat] food and Cantonese food. And what ended up and Cantonese food is a bit more exotic. It's a bit more squishy. Uh, squishies are probably like one of the best words to describe it. Uh, and and so like squiddy and and kind of just

just weird fish and and anthropods that you can't really uh figure out. But it was good. It it was just every dinner that we went to and even some lunches where basically the MMO is if you're if it's fancy, it usually skews Cantonese. And every one of these dinners ended up being fancy. So, it was just like 80% of our meals. Um, and the Chinese food though we had a couple times was was really good. I mean, I I I liked all of it. I think we just ended up having like 90% Cantonese and I think that that ratio was the was the issue.

>> Squishy. Good word, huh? >> Yeah. Sorry, my my uh my video cut out. But yeah, I I would say uh we spent a good amount of time in Shenzhen, which is, you know, uh obviously in Guangdong, close to Hong Kong. And so, yeah, they they like uh there's a lot of Cantonese cuisine, which I would say at the high end is pretty fancy and a little more exotic. So, the guys, you know, I think did well being adventurous in in some of their meals. Um yeah, I guess I actually am partial. I kind of feel like Chinese cuisine is one of those where actually the everyday like street stalls. Like actually for my palette, it tends to be better and easier than like the super

high-end stuff which starts to get a little bit more more creative. So when in doubt, I actually feel like the the the bluecollar street stall options tend to be um you know the stuff that I I actually really like about Chinese cuisine. But Chinese cuisine is super diverse. So, you know, if you're in Yunan, you'll get very different from when you're in Shing Jang, from when you're in Shenzhen, from when you're in Shanghai. Like, you know, it it's it's pretty it's pretty diverse. But I thought the guys did well with um some some more creative dishes.

>> Honestly, the most difficult thing to consume, and I'm a pretty big drinker, was this booze that they have there. Holy hell. What is it called again? >> Bio. I thought I thought you were a huge huge Ber fan by the end of the trip. Y >> it's it's uh it's probably one of the harder alcohols I've to consume I've ever tried. >> Yeah, it's it's definitely an acquired taste, but it's like Yeah, I mean it's all the rage, especially with the older cohort in China. If you go to like a lunch um with like anyone over like 45, I think there'll be a good amount of baiou consumed. It's a pretty big part of the culture. But yeah, I do I do think that like in general if you come

to China like uh I've you know I I've been very impressed by the hospitality living here. I feel like people in general like when they're hosting are exceptionally gracious and like really really welcoming. Um and hopefully Yan and Jose and the guys felt that on this trip. Like every time someone takes you out for a meal or like invites you over um they typically do go above and beyond. So I I I feel it's like actually a very generous people despite what is portrayed often times in the media.

>> 100%. Yeah, I couldn't couldn't agree more. And and uh one element I really enjoyed was just that every large dinner was a round table and so you basically had the food sitting in the middle and this this this plate would rotate maybe like I don't know one rotation every two minutes. So you gradually pick off food and and put on your plate. But the other element was just that even if you had a group of six or 15, it still managed to just be one conversation for the most part that everyone was kind of a part of where as I think most other areas you have these rectangular tables and and it siphons off into three or four and it just becomes chaos. Whereas here it was a really good setup to kind of for everyone to meet each other and and kind of be all speaking uh about one thing. I

thought that was really productive because you didn't have this issue where it's like, "Oh, I'm don't really get to meet this person or or hear about them because, you know, the whole point of this was to to do, you know, meet and greets and understand how people are thinking about uh Chinese markets, Western markets, and everything in between." And so this was a really fun way to do that bullish roundts. >> Well, [clears throat] yeah. Um, sounds like it was fun. I'll have to go someday, Ross. And I have to hit you up. Uh >> yeah, come come on through, sir. >> Yeah, but uh but yeah, I think we'll we'll wrap it here for this week. Uh thanks everyone for coming on. Thanks Rosson for making a guest appearance. Uh I think that was some cool insights

>> into the Chinese tech and AI market. Um and yeah, we'll see everybody else in a in a couple weeks. >> Thank you. >> [music]